Fund May Use $100 Billion a Year to Encourage Carbon Price

Dec. 7 (Bloomberg) -- The Green Climate Fund, designed to
channel as much as $100 billion a year in pledges to emerging
nations, may try to wean recipients off fossil fuel and encourage
them to put a price on carbon, according to an overseer.

The fund may guarantee bank loans in developing nations for
projects ranging from wind farms to building insulation and
less-polluting agricultural equipment, Naoko Ishii, chief
executive officer of the Global Environment Facility in
Washington, said yesterday in an interview in Doha. She heads
one of two secretariats governing the fund.

Climate projects may be able to get private-sector finance
augmented by guarantees from the fund, alongside discounted
loans from government or development banks, Ishii said. The 24-member board of the Green Climate Fund, which is still waiting
to recieve money from developed nations, may make loans or
guarantees conditional on the recipient having the right
environmental policies in place, she said.

“I know that conditionality is a very sensitive word, but
from the donor point of view, if the money is to be impactful,
there must be some policy environment put in place,” Ishii
said.

United Nations envoys from about 200 nations meeting in the
Qatari capital this week are seeking to extend the Kyoto
Protocol and lay the groundwork for a global climate agreement
for 2020. Financing from richer nations to the developing world
for the next seven years will help cut emissions before the new
deal comes into force, Ishii said.

Improve Funding

The GEF and the fund would make progress on details of how
to improve funding during the next year, she said.

Envoys should recognize the climate crisis is deep enough
to warrant developing-nation policies that help protect the
public money available for emission-reduction and adaptation,
Ishii said. Measures may include so-called feed-in tariffs that
provide higher rates for renewable-energy producers, a carbon
price and the phasing out of fossil-fuel subsidies, she said.

Using the fund to guarantee loans for climate finance
“would be extremely welcome because we are always looking to
leverage money that’s available,” India’s lead climate
negotiator Mira Mehrishi said in interview in Doha.

India may consider agreeing to rules set down by the fund,
Mehrishi said.

“The government’s policy would have to be looked at
because feed-in tariffs are governed by regulators in our
country,” she said. “That’s something I will not be able to
answer without a discussion with them, with the energy sector.”

Key Question

A key question for UN envoys is whether to withhold climate
funds for nations that don’t have a carbon price in place, Ishii
said.

“Anything that helps provide some market continuity would
be welcome,”said Dirk Forrister, chief executive of the
International Emissions Trading Association in Geneva. “It adds
a dose of confidence,” he said today in an interview in Doha.
IETA is a lobby group in favor of cap-and-trade markets.

Certified Emission Reduction credits fell 3 cents today to
66 euro cents ($0.86) a metric ton on the ICE Futures Europe
exchange in London at 5 p.m. They’ve dropped 87 percent in the
past year as demand in Europe waned and supplies surged.

The International Chamber of Commerce said Dec. 3 companies
and pension funds are hoarding cash rather than spending it
because climate-protection rules are lacking.

“Tell us what the rules are going to be so we know how to
integrate them into our business,” said Jean-Guy Carrier,
secretary general of the Paris-based chamber, whose members
represent businesses from Qatar to the U.S.

$4.8 Trillion

Renewable subsidies in 2011, including biofuels, amounted
to $88 billion, the International Energy Agency in Paris said
Nov. 12. Over the period to 2035, they need to amount to $4.8
trillion, over half of which has already been committed to
existing projects or needed to meet 2020 targets, it said.

The Green Climate Fund use of the private sector may blur
the lines between debt and equity or potentially include
mandates for outside fund managers, Abyd Karmali, head of carbon
for Bank of America Corp. in London, said Nov. 2 by phone.

“Nothing’s been taken off the table,” he said. “Most of
the mechanisms that the Green Climate Fund’s private sector
facility may look at will be completely outside what we
currently call the carbon markets.”